Euro Zone Ministers Pledge Lasting Fiscal Support for Economy

September 11, 2020 Updated: September 11, 2020

BERLIN—Euro zone finance ministers pledged continued fiscal support on Friday to get their economies running again after the COVID-19 crisis, chairman of the Eurogroup Paschal Donohoe said after they met in Berlin.

At their first in-person meeting since February, finance ministers from the 19 countries that share the euro talked informally about the fiscal response to the pandemic that has savaged the European economy since March.

“There will be no sudden stop, no policy cliff-edge, and overall budgetary policy will continue to support the economy,” Donohoe, who is Ireland’s finance minister, told a news conference after the meeting.

Eurogroup President Paschal Donohoe
Eurogroup President Paschal Donohoe attends a news conference during the Informal Meeting of Ministers for Economics and Financial Affairs in Berlin on Sept. 11, 2020. (Hannibal Hanschke/Reuters)

While the ministers did not pledge any addition to the vast sums already promised to keep the economy going, they made clear there would not be fiscal tightening any time soon and that they would keep their foot on the accelerator as long as needed.

European Union governments have already announced more than 3.7 trillion euros in various support measures for their economies since the pandemic started and the bloc has added another 1.3 trillion euros that could be tapped over time.

The latter includes a recovery package of 750 billion euros in grants and loans that the EU as a whole will borrow on financial markets and spend over the next three years to boost growth. The package is now going through the European Parliament and is expected to be ready by Jan. 1.

In total, government support in various forms is almost 36 percent of EU gross domestic product, on top of unprecedented European Central Bank support measures. This is boosting European public debt levels, but growth is now the ministers’ priority.

“Concerning the fiscal stance for 2021, given the current high level of uncertainty … a premature withdrawal of support would put the fragile recovery in jeopardy,” EU Economics Commissioner Paolo Gentiloni said.

“If we miscalculate the timing of this landing, we risk damaging the European economy.”

Ministers also expressed support for pushing forward with stalled projects such as the EU’s banking union, which still lacks a common deposit guarantee scheme.

The European Commission expects the EU economy to shrink by an unprecedented 8.3 percent in 2020 after 1.5 percent growth in 2019 because of the economic disruption caused by the pandemic.